Gold Value eases while EFT holdings fall, U.S. funds monitored

Gold value eased early this week as the demand diminished for gold-backed exchange-traded funds and investors persisted to come in terms of the wide series of US government spending cuts on gold bullion.

The lack of major US economic indicators and a dreary US equities market proved futile to offer gold with a new means to gain the advantage in a quieter trading.

Several investors remained seated on the bench with the U.S. president along with the congressional Republicans were still apart on an agreement to avoid automatic US budget cuts. The president has already executed the cuts in government spending last week.

With gold being the safest investment in times of economic downturn and uncertainty, is also regarded as a hedge on inflation and a primary reduction in US spending has allayed the majority of inflation concerns. Also putting a hefty weigh on investor sentiment are data showing holdings of the world’s largest gold-backed ETF; SPDR Gold Trust which landed a 9th consecutive daily low since Friday.

According to a precious metals expert and strategist, February marked the largest monthly drop across physically backed gold exchange-traded products. The continued net recovery at this current pace causes a relatively large downside risk in existing prices. Moreover, spot gold price was down 0.1 % at $ 1,573.46 at the most recent exchange.

US gold futures for the month of April delivery mended up to 10 cents per ounce at $1,572.40 with the trading volume 30 % below the 250-day average according to Reuter’s reports. The SPDR Gold Trust went up a notch of 0.6 tons this week, extending its trailing losses after its largest one-month drop last month.

Gold prices in February plummeted for the fifth consecutive month for the first time since the last decade. The buying interest fell after the metal failed to rally back to its former record highs last year even with the successive rounds of monetary easing from the Federal Reserve.

Gold mining stocks took a strong blow as bullion prices cascaded. The S&P GSCI Gold index (the gold equities benchmark) posted a five consecutive month of losing streak which was considered its longest loss of the decade.

Although gold ETFs were ironically dull, sales of American eagle gold coins and silver rose went to soaring levels year-on-year in the previous month highlighting fervent purchasing ability by individual investors with silver inching down 1 cent at $28.55 an ounce.